Overview
- The Federal Reserve on Wednesday kept the federal funds target at 3.50%–3.75% in a 9-3 vote, with Cleveland Fed chief Beth Hammack, Minneapolis Fed chief Neel Kashkari and Dallas Fed chief Lorie K. Logan dissenting in favor of a 25-basis-point hike.
- Chair Kevin Warsh said the Fed “will not waver” in returning inflation to 2 percent and has pulled back on explicit guidance while launching five internal task forces to review communications, the balance sheet, data and the inflation framework.
- Financial markets sharply raised the probability of a rate rise at the September meeting, with some measures such as CME’s FedWatch implying roughly a greater-than-50 percent chance and other market tools showing even higher odds.
- Recent price pressures reflect mostly supply shocks — renewed Iran-related energy disruption has pushed oil and pump prices higher, heavy AI-driven capital spending is boosting demand for electronics and power, and tariff moves are feeding through to goods prices.
- The Fed flagged that incoming July and August inflation reports and jobs data will be decisive for policy, while higher Treasury yields and mortgage costs are already affecting borrowing costs for households and businesses.